98 Cases of Unfair Trade Allegations Last Year... Over 60% Involving Use of Non-Public Information

Last year, 98 cases of unfair trading allegations were identified in the domestic stock market.

The Korea Exchange announced on the 12th that the Market Surveillance Committee reviewed abnormal trading cases in 2024 and reported a total of 98 unfair trading allegation cases to the Financial Services Commission.

Jung Eun-bo, Chairman of the Korea Exchange, holds a New Year's press conference at the Korea Exchange in Yeouido, Seoul on the 11th. 2025.02.11 Photo by Yoon Dong-joo

By type of allegation, insider trading cases accounted for the largest proportion with 59 cases (60.2%). Including complex allegations with multiple reasons for notification, the number rises to 66 cases. The Korea Exchange explained that the number of insider trading notifications increased compared to the previous year due to a large number of cases involving the use of favorable information related to tender offers (12 cases). On the other hand, as unfair trading regulations were strengthened and the stock market remained sluggish, fraudulent trading (18 cases) and market manipulation (16 cases) cases decreased by 41.9% and 30.4%, respectively, compared to the previous year.

By market, the KOSDAQ market accounted for the highest proportion with 72 cases (73.5%). The KOSPI market (24 cases, 24.5%), KONEX market (1 case, 1.0%), and derivatives (1 case, 1.0%) followed. The proportion of notifications relative to the number of listed companies was also higher in the KOSDAQ market (4.0%) than in the KOSPI market (2.5%). The Korea Exchange diagnosed that "listed companies in the KOSDAQ market, which have relatively weak governance and many small and medium-sized marginal companies, have been confirmed as the main targets of unfair trading."

The average number of suspects per case was about 15 as fraudulent trading and market manipulation cases decreased. This is a decrease of 5 people compared to the previous year (20 people). In particular, insiders accounted for 88.9% of fraudulent trading cases (16 out of 18 cases). In market manipulation cases, half (8 out of 16 cases) involved insider participation.

Among the insider trading cases with the most allegations (66 cases), 52 involved the use of favorable information and 14 involved the use of unfavorable information. Especially, as cases of tender offers for voluntary delisting, securing management rights, and stabilizing management in companies involved in management disputes increased, many cases occurred where employees of the target companies and advisory firms used tender offer information to realize profits.

Fraudulent trading methods are also becoming increasingly sophisticated. The Korea Exchange warned, "Typical methods such as forming the appearance of large-scale fundraising through no-capital M&A followed by entry into new businesses aligned with social themes, issuing paid-in capital increases and private convertible bonds, and then boosting stock prices to realize profits continue," but also noted, "Cases using false disclosures or reports that are difficult to verify, such as signing supply contracts or attracting investments with unclear overseas companies, are increasing." Additionally, methods such as concealing important facts like collateral contracts by major shareholders or announcing and then withdrawing private convertible bond issuances with no likelihood of payment are also being carried out.

The Korea Exchange urged caution when investing in theme stocks unrelated to corporate value, stocks with frequent changes in major shareholders, or those conducting large-scale fundraising. Attention is also required regarding online communities such as social networking services (SNS) and unverified leading chat rooms.

Under a close cooperation system with regulatory agencies, the Korea Exchange plans to strengthen responses to unfair trading using political themes, market disorder caused by high-frequency algorithmic trading, and proof of allegations related to online unfair trading (SNS, leading chat rooms, YouTube, etc.).

This content was produced with the assistance of AI translation services.